June 7, 2010

In a 4-to-3 decision, the Georgia Supreme Court has upheld a ruling by a Cobb County court prohibiting a state official from investigating a law firm that collects debts on behalf of creditors.

Background

Joseph Doyle is the Administrator of the Fair Business Practices Act of 1975, Georgia’s principal consumer protection law that prohibits deceptive practices involving consumer trade. Doyle enforces the law through the Governor’s Office of Consumer Affairs in the executive branch. In 2008, after receiving complaints alleging abusive debt collection practices, Doyle issued an “investigative demand” to Frederick J. Hanna & Associates, P.C., requesting documents and information.

When Hanna refused to provide the information, Doyle petitioned the court to force Hanna to comply. The court refused, concluding that the demand amounted to an attempt to regulate Hanna’s law practice. Such regulation violates the Georgia Constitution’s separation of powers requirement, the court concluded, and “constitutes an impermissible interference by the executive branch into the exclusive jurisdiction of the judicial branch of government.” Under the Constitution, the judicial branch has the exclusive power to regulate the practice of law. Doyle, represented by Attorney General Thurbert Baker’s office, appealed to the state Supreme Court. Hanna is represented by the former Attorney General, Michael Bowers.

Majority: Governor’s Office Cannot Regulate Practice of Law

“The issue in this case is not whether the [Fair Business Practices Act] applies to a law firm’s own commercial or entrepreneurial activity when, for example, it attempts to collect fees from a client,” says today’s majority opinion, written by Presiding Justice George Carley. “Instead, this case involves [Hanna’s] attempts to collect moneys that were owed to its clients.” Therefore, “we hold that the representation of clients by a law firm does not come within the [Fair Business Practices Act] even if certain services were provided by non-lawyers within the firm and could have been offered by a company without any attorneys. If [Hanna’s] employees engaged in wrongful conduct against debtors, the remedy must be found outside the [Act].” Chief Justice Carol Hunstein, and Justices Robert Benham and Hugh Thompson join in the majority.

Dissent: Lawyers Should Not Abuse Public and Violate Consumer Protection Laws

In the dissent, however, Justice Harold Melton writes that the Fair Business Practices Act “is a law of general application that has nothing to do with impermissibly regulating the practice of law in violation of separation of powers.” As a result, “I must respectfully dissent from the majority’s erroneous conclusion that the remedies relating to [Hanna’s] allegedly abusive debt collection practices … must be found outside the [Act].‟ Investigating violations of the law that happen to involve lawyers does not automatically amount to impermissibly … regulating‟ the practice of law, as a lawyer who violates the law is just as subject to investigation as any other common offender.” Furthermore, “an attorney cannot abuse members of the public by engaging in unfair and unlawful debt collection practices and then shield himself from investigation under the [Act] because he was engaging in such unfair practices … on behalf of a client,” the dissent says. “A lawyer can, and must, practice law without punching people in the face. And a lawyer can, and must, practice law without violating the [Fair Business Practices Act] by abusing members of the public.” Justices P. Harris Hines and David Nahmias join in the dissent.

The Campaign Money Connection

A quick check of the Georgia State Ethics Commission web site reveals a disturbing connection between the actors involved in this case and the judges involved. The attorneys involved, including Mr. Hanna and Mr. Bowers, have regularly contributed substantial sums to the campaigns of the trial and appellate court judges that heard this case.

Bowers has donated substantial sums to the campaigns of Georgia Supreme Court Justices Benham, Hunstein, Melton, as well as the election campaign of the trial court judge, Lark Ingram of Cobb County Superior Court. See details.

Hanna has donated $10,000 to Thurbert Baker’s campaigns for Attorney General, the office tasked to enforce state law for the executive branch of Georgia. See details.

Debt collection attorneys can use the legal process to locate and collect assets, but consumer protection laws, according to this decision, cannot be used to investigate law firm debt collection practices. The implication is that attorneys are “above the law.” What relief is available to consumers who are subject to abusive debt collection practices by law firms? Are they supposed to file bar complaints and rely upon the State Bar of Georgia to regulate lawyers? As the court notes, non-lawyers may engage in debt collection and would be subject to regulation by the Governor’s office; therefore, two firms may engage in the same conduct by not be treated equally under the law.

The sad thing about this case is it is just an investigation of consumer complaints. In all likelihood, Hanna & Associates did not break the law. They go after people who are trying to cheat their creditors. Those who complain about debt collection practices are trying to get away with cheating creditors and have strong financial incentives to attack those trying to collect a valid judgment. Sunshine is a great antiseptic. When there is an apparent effort to cover-up, prevent investigation, and use status and money for unjust influence, minor incidents can lead to major infections. A case like this sends a terrible message to the public.

March 17, 2010

In a split 4-to-3 vote, the Supreme Court of Georgia has upheld the state’s emergency room statute as constitutional. Passed as part of the General Assembly’s 2005 “tort reform” legislation, the ER Statute states that certain emergency health care providers cannot be held liable unless there is “clear and convincing evidence” they were grossly negligent.

In today’s opinion, written by Presiding Justice George Carley (data), the majority finds that the statute is a “general law,” as opposed to a “special law,” and therefore passes constitutional muster. The Georgia Constitution prohibits special laws that are not applied uniformly throughout the state and when general laws on the same issue already exist.

The constitutional challenge of the statute stems from a lawsuit filed in Muscogee County by Carol and Robert Gliemmo. According to briefs filed in the case, the night of April 22, 2007, Carol Gliemmo felt a sudden “snapping in her head.” Her husband called an ambulance, which took her to St. Francis Hospital in Columbus where Dr. Mark Cousineau treated her in the emergency room. Cousineau diagnosed Gliemmo with “hypertensive urgency,” or greatly increased blood pressure. The Gliemmos later claimed the physician blamed her headache on “stress” and high blood pressure, prescribed Valium and sent her home. The hospital and physician claimed they gave her a beta-blocker to treat the high blood pressure and performed an EKG and blood tests. After her blood pressure went down and she told nurses she felt “much better,” they released her. Two days later, her family practitioner ordered a CT scan, which revealed a brain hemorrhage that left her paralyzed.

Gliemmo and her husband sued Cousineau, St. Francis and the physician’s employer, alleging professional negligence for failing to order a CT scan that would have detected her brain aneurysm. The defendants filed a motion to dismiss the case on the ground that the Gliemmos failed to establish that the emergency medical providers had been “grossly negligent,” and therefore they were not liable under Official Code of Georgia § 51-1-29.5 (c) – the state’s ER Statute. In response, the Gliemmos challenged the ER Statute as unconstitutional, arguing the statute is a special law because it gives special liability exemption to emergency medical care providers, despite general laws governing negligence claims that apply to all other health care professionals. The trial court judge rejected their challenge but asked for the state Supreme Court’s guidance before proceeding to trial.

“This Court has found a statute to be a special law where it .. deals with a limited activity in a specific industry during a limited time frame,” the opinion states. Georgia’s ER Statute “is not a special law affecting only a limited activity in a specific industry during a limited time frame. Rather…it is a general law because it operates uniformly upon all health care liability claims arising from emergency medical care as provided in the statute.”

The majority points out the General Assembly passed the legislation in response to the growing difficulty in finding and affording medical malpractice insurance. “Promoting affordable liability insurance for health care providers and hospitals, and thereby promoting the availability of quality health care services, are certainly legitimate legislative purposes,” the majority opinion states. “Furthermore, it is entirely logical to assume that emergency medical care provided in hospital emergency rooms is different from medical care provided in other settings, and that establishing a standard of care and a burden of proof that reduces the potential liability of the providers of such care will help achieve those legitimate legislative goals.” Joining the majority are Justices P. Harris Hines, Harold Melton and David Nahmias.

Justice Robert Benham (data) writes in a dissent that “the 2005 law is a special law that is unconstitutional on two grounds: the General Assembly previously enacted a general law concerning the standard of care to which medical personnel must adhere to avoid liability; and the classification of those affected by the new legislation is unreasonable.” Since 1863, Georgia law has required physicians to practice their profession with “a reasonable degree of care and skill,” and any injury resulting from a failure to do so can bring a lawsuit. Here, “the 2005 legislation affects a limited class of health-care providers, with that limited class defined by what health care they provide and where they provide it,” the dissent says. “Those within the limited class are protected from liability by a lower standard of care and a higher burden of proof…”

The Georgia Supreme Court has reversed by 5-to-2 a Fulton County court order and upheld as constitutional a provision in the 2005 Tort Reform Act that in some instances requires one side in a lawsuit to pay the other side’s attorney’s fees. The Court brushed aside claims that the fee-shifting provisions in the Act effectively deny poor litigants access to the courts, flatly concluding that there is no right of access to the Georgia Courts.

The case began with a couple’s lawsuit against Chuck Smith, former defensive end for the Atlanta Falcons football team. According to briefs filed in the case, in 2005, Smith’s wife took his 11-year-old daughter to have her hair chemically relaxed at Salon Baptiste, a hair and nail salon owned by Cheryl Baptiste.The next week, Baptiste and her husband learned that Smith, hosted a sports broadcast on WQXI radio, had made disparaging remarks on air about Baptiste and her salon.

In January 2006, the Baptistes sued Smith for defamation and other civil wrongs. In July 2006, the Smiths offered the Baptistes $5,000 to settle, but the Baptistes rejected the offer. In February 2007, the trial court ruled in the Smiths’ favor, granting them judgment on all counts raised in the Baptistes’ lawsuit.

While the Baptistes’ appeal was pending, the Smiths filed a motion asking the court to require the Baptistes to pay their legal fees, based on the “offer of settlement” statute that is part of the Tort Reform Act. Under the statute, if the Baptistes were ultimately to lose their case, or if they won but the judgment was less than 75 percent of the Smiths‟ offer, they would have to pay Smiths’ attorney’s fees. In response, the Baptistes argued that the statute is unconstitutional and denies poor people the right of access to the courts even when they have a legitimate cause of action.

In March 2009, the trial court ruled in their favor and found that the “offer of settlement” statute is unconstitutional. The Smiths then appealed to the Georgia Supreme Court.

In a majority opinion written by Presiding Justice George Carley (data), the high court has reversed the trial court’s decision and ruled in favor of the Smiths. The Georgia Constitution states that “no person shall be deprived of the right to prosecute or defend, either in person or by an attorney, that person’s own cause in any of the courts of this state.” But contrary to the trial court’s ruling, that constitutional provision “was never intended to provide a right of access to the courts, but was intended to provide only a right of choice between self-representation and representation by counsel…,” the opinion states. “Thus, there is no express constitutional … right of access to the courts under the Georgia Constitution.”

The statute is not an unconstitutional specific law, as the Baptistes contend, but rather a general law whose “clear purpose” is to “encourage litigants in tort cases to make and accept good faith settlement proposals in order to avoid unnecessary litigation.” The majority underscores the importance of the “doctrine of stare decisis,” or the doctrine of precedent, under which a court is expected to follow earlier judicial decisions on the same topic. The majority points out that in one of its earlier decisions, the state Supreme Court quoted a statement from the 1877 Constitutional Convention, “which clearly shows that the reason for the adoption of the original version of the provision now in issue was to ensure a person’s right of self-representation.”

In the dissent, Chief Justice Carol Hunstein (data) writes that the Georgia Constitution “plainly and unambiguously accords the people of this State the fundamental right to access the courts.” But the majority has constricted its scope “to a mere right to self-representation in the courts.” And the sole basis for the majority’s interpretation is a report of the 1877 Constitutional Convention written by a reporter for The Atlanta Constitution. “The majority’s reliance on an unofficial journalist’s account is in direct contravention of our precedent refusing to accept as authority even the actual videotaped recordings of statements made by legislators themselves because those recordings are not official accounts on which this Court may rely when interpreting our statutes,” the dissent says.

As the trial court held, the statute “serves to impede, if not outright deter, plaintiffs with meritorious causes of action from filing suit to obtain judicial resolution of their grievances because of the financial peril in which that statute places them.” Justice Robert Benham joins in the dissent.

February 8, 2010

The Georgia Supreme Court ruled that investors seeking to recover more than $200 million of losses in WorldCom stock has a fraud case against their former security broker his employer (now Citigroup).

Jack Grubman and his investment companies alleges that he wanted to sell his 2.1 million WorldCom shares in 1999, but his broker convinced him to retain his shares and invest more in WorldCom. WorldCom collapsed amid massive accounting fraud and Grubman claims his broker covered up the problems at WorldCom to protect his employer’s money-making relationship with WorldCom.

The matter came before the Georgia Supreme Court as a certified question from the U.S. Second Circuit Court of Appeals. On occasion, federal courts may certify a question of state law to a state supreme court. In this case, the Second Circuit asked the Georgia Supreme Court whether Grubman et al have a valid claim under Georgia law.

The Georgia Supreme Court, in a unanimous opinion authored by Justice Carley (data), held that Georgia law recognizes a fraud claim where investors have been induced to not sell securities and that, under Georgia law, a brokerage firm owes a fiduciary duty to a non-discretionary account. Additionally, the Court noted that Grubman et al must prove the alleged fraud proximately caused their losses.

This case is far from over. We might expect the Second Circuit to rule in Grubman et al’s favor against Citigroup based on the response from the Georgia Supreme Court, but predicting the outcome of a case as complicated and high stakes as this is far from an exact science.

February 4, 2010

In a 5-to-2 decision released February 1, 2009, the Georgia Supreme Court upheld a Gwinnett County court’s finding that the will left by Marion Peterson was legally valid, despite changes she made in pen.

Peterson, who died in 2008, wrote her will in 1976. As required by state law, two witnesses attested to the will’s legitimacy. In the document, Peterson left her estate in the form of a trust to her longtime companion, Vasta Lucas, whom she also named as executor or manager of the estate. Upon Lucas’s death, any remaining assets were to be distributed to four beneficiaries, including her brother and sister, Arvin Peterson and Carolyn Basner.

At some point after the will’s execution, Peterson struck through with an ink pen the names of all successor beneficiaries. She also struck through language naming Richard Harrell as successor executor and trustee once Lucas died. Instead, she wrote that Julie Peterson was to be the will’s executor. No one witnessed or attested to the strikethroughs.

After Peterson’s death, Lucas filed a petition in probate court asking the court to authorize the will as valid. But Peterson’s siblings filed a “caveat,” contesting the will as invalid and arguing that Peterson had revoked the will by virtue of the strikethroughs.

Georgia law states: “The intent to revoke [a will] shall be presumed from the obliteration or cancellation of a material portion of the will, but such presumption may be overcome by a preponderance of the evidence.”

The trial court ruled against the siblings and admitted the will to probate. Lucas has since died, and the court appointed Harrell as executor and trustee of the estate.

In an opinion written by Justice Hugh Thompson (data), the high court affirmed the lower court’s ruling, finding no error in the conclusion that Peterson “did not intend to revoke her entire will.” The will was found in good condition on Peterson’s desk, with the proper signatures, and she had initialed her changes. “As found by the trial court, this evidence clearly indicates testator’s intent to cancel only certain provisions of the will, not an intent to revoke the will in it its entirety as required for revocation” under the law.

But in dissent, Presiding Justice Carley (data) wrote that “the cancellation of a material portion of the will raises the presumption, which has not been rebutted, that Testatrix intended to revoke the entire will. … Because there was an actual cancellation of the names of all successor beneficiaries, the next question presented is whether that cancellation is ‘material’ within the meaning of the statute.” Justice Carley concluded the cancellation was material “because it directly affected the distribution of all property in the estate.” The trial court’s ruling should be reversed, according to the dissent, which was joined by Chief Justice Carol Hunstein (data).